Jindal, Adani Power, GMR come under govt scanner

The move comes in the midst of a court battle between the Naveen Jindal-promoted Jindal Power and the government.

Coal The government was planning to refer the bids placed by Jindal Power, Adani Power and GMR for Gare Palma-IV/2&3 blocks in the recently concluded coal block auction to the Competition Commission of India, people close to the developments said.

The move comes in the midst of a court battle between the Naveen Jindal-promoted Jindal Power and the government.

Jindal Power had recently moved court against the government's decision to deny it the block.

A wholly owned subsidiary of JSPL, Jindal Power, had emerged the lowest bidder for this block, which the company was operating till it was deallocated after a Supreme Court order in August last year.

The bid log shows that Adani Power Maharashtra Ltd and GMR Chhattisgarh Energy Ltd had pulled out of the bidding process after putting only one negative bid each.

“The bids received for Gare Palma-IV/2&3 coal mines could be anti-competition.

"Though the government said in its report that there was no evidence of collusive bidding, the procedure for bidding indicates anomaly in timing and bid amounts of participating companies,” said one of the people in the know.

The coal ministry was also considering the option of approaching an investigating agency to further probe the process of bid submission by the three companies, said a government official.

The nominated authority for auctioning had earlier done a preliminary inquiry into the bids.

A senior competition lawyer, who did not wish to be named, said a case of anti-competitive behaviour under Section 3 of the Competition Act, 2002, could be invoked. This section covers cartelisation and deals with anti-competitive agreements.

“Participation in a bid is a calculated decision; if one is withdrawing at a later stage, there should be enough justification for it,” said a former senior CCI official. “CCI can in such cases ask the other firms (Adani and GMR) why they participated in the first stage and backed out from the second.

“Board documents, for when such decisions are taken (by the company), can be sought.”

The bid log for Gare Palma-IV/2&3 disclosed that Adani Power pulled out of the race after its opening bid of Rs 501 a tonne, while GMR withdrew after putting a Rs zero bid. The bidding concluded in two hours, at Jindal Power’s minus Rs 102.

Negative bids for coal blocks meant for the power sector imply that the winner will charge a negative fuel cost to the power distribution company it will sell power to.

GMR went on to win Talabira-I in Odisha for a much higher bid, of minus Rs 478 a tonne, in an auction that went on for 10 hours.

Adani Power won the non-operational Jitpur coal block, earlier owned by Jindal Power, in Jharkhand, for minus Rs 302, during the second phase of auction, officials pointed out.

Jindal Steel & Power managing director and chief executive Ravi Uppal, had, however, told Business Standard earlier that the government should respect the outcome of its own auctioning process.

He had said his group had bid strictly in compliance with the procedure laid out by the government.

A senior coal ministry official refused to comment on the development but said the ministry was in a strong position to get the bids probed.

"It is difficult to understand why other qualified bidders did not bid for this mine.

“This is a mine with the highest extractable reserves but other comparatively small mines received much higher bids," said the official.

Auctioning for other blocks meant for the power sector attracted bids in the range of negative Rs 115 to Rs 216 a tonne.

The competition lawyer, however, said the government's reference to CCI for an investigation might need a strong evidence of economic quid pro quo between the winner and other contenders.

"Without any clear evidence of agreement among companies, or some foul play in the matter, investigation will be difficult.

“It must be understood that every business has the right to participate or not participate in the bidding process," said a former CCI official who did not wish to be named.

Among the bids received for the 40 mines auctioned, the coal ministry had not approved three bids. These were the ones for Tara block (West Bengal), Gare Palma IV 2&3 (Jharkhand) with end-use power generation - both won by Jindal Power -- and Gare Palma-IV/1 (won by Balco in the unregulated category).

The Delhi High Court had on March 23 ordered the status quo on the Tara block and asked the government to file a reply in the case of the Gare Palma IV/2&3 blocks.

COAL CONUNDRUM

What’s the case?

JSPL won the Gare Palma-IV/2&3 blocks by making the lowest bid, of -- Rs 108 a tonne
But the government did not approve the bid, saying it was too low. Bids for other blocks reserved for the power sector ranged between -Rs 115 and Rs 216 a tonne
JSPL moved the Delhi High Court, which observed there seemed no evidence of cartelization
The coal ministry’s report highlighted anomaly in bids by all participants for Gare Palma-IV/2&3 blocks
Auction of 40 producing blocks ran from February 14 to March 10

What CCI could investigate